Introduction
The concept of “the Social Contract” states that in order for society to continue to develop and maintain order a main set of rules must be agreed upon in order to set into motion proper ethical values (Blake, 2009: 1 – 2). In other words, a social contract can be considered a form of moral obligation that a person or group of individuals agree to in order to form the society that they currently live in.
There are numerous manifestations of this, which can be seen in the world today, such as individuals following a distinct set of moral and ethical standards when it comes to dealing with other members of society. In the case of businesses, this comes in the form of adhering to a certain moral code involving the way in which they provide goods and services to their consumers or deal with other businesses within the same industry.
The application of this moral code takes the form of Corporate Social Responsibility (CSR) which is the application of internal self-regulating practices by a business to ensure that it follows a distinct set of ethical standards, business norms and laws (Welker, Partridge & Hardin, 2011: 3 – 8).
What must be understood though is that businesses are primarily profit-driven, this can be seen in the case of Carroll’s pyramid wherein economic responsibilities form the base of the pyramid and are the primary focus of all businesses today. Thus, when it comes to the importance businesses accrue to the concept of CSR, it can be seen that in the business decision matrix, they consider it to be less than the need to be profitable.
This method of thinking has given rise to numerous ethically dubious practices ranging from environmental degradation through various acts of pollution, overconsumption of natural resources such as fish and trees, the use of sweatshops, and finally various practices such as corporate collusion and the creation of monopolies in order to better control the options of consumers.
It is based on this that it must be questioned how the social contract can be implemented on corporations in light of their morally ambiguous actions in the present.
Current Business Practices in the World Today
As mentioned earlier, businesses are primarily profit-driven and, as such, seek to maximize profits and reduce costs in any way that they can.
Barriers to doing so come in the form of laws that either limit particular practices (such as environmental conservation laws), outright ban particular practices (as seen in the case of laws against corporate collusion and the formation of monopolies) or implement measures that constrain a company’s ability to produce goods at a far cheaper rate (labor laws and local tax rates).
In order to get around this, many companies have begun outsourcing their means of production to various countries such as India and China. While corporations do have the right to reduce their cost of operations, it must be wondered whether the basis for this cost reduction violates certain ethical standards of doing business (Stansbury, 2009: 33 – 44).
For example, it can be seen in the case of China that due to the lack of environmental conservation laws, companies can in effect utilize production methods that are cheaper but environmentally damaging.
Furthermore, since these locations are far from prying eyes of consumers, the use of sweatshops with deplorable conditions for their workers has become a rampant means of reducing costs (Ramasamy & Yeung, n.d.: 119).
Various U.S. based companies get away with such actions by stating that they were unaware of such practices since the work was contracted to another company, yet it is obvious that there is no way that they wouldn’t have known given the savings they gain from such practices.
Other questionable ethical practices can be seen within the U.S. today wherein various corporations (such as GE) have received billions of dollars in corporate tax breaks in order to generate local jobs yet these companies (GE in particular) have instead continued the practice of outsourcing to locations such as China.
Lastly, it was reported in 2011 that the supply of bluefin tuna in the world’s oceans today has been severely depleted due to overfishing yet the response of fishing companies has been to continue the practice despite the fact that they are in effect driving an entire species into extinction.
It is this and other morally questionable practices that one must wonder whether the social contract is even applicable to corporations at all or if they even consider themselves under its mandate considering the sheer amount of violations seen around the world.
Application of Theories
One way of looking at this problem is from the perspective of Garret Hardin and his view regarding self-interest and consensual constraint. For Hardin, it is actually impossible for any individual (or in this case a corporation) to act or make a decision against its own interest.
This manifests itself in the decision to pursue an act of self-interest in order to maximize the utility that can be derived from the consumption or use of a particular resource. In the case of corporations, this comes in the form of the large scale consumption of various natural resources such as fossil fuels, mineral resources and even fish in order to make a profit from their line of business.
Unfortunately, Hardin states that it is due to this pursuit of independent self-interest that a limited resource will inevitably be depleted, which really isn’t in the best interests of all parties concerned.
One way of resolving this issue is to apply what Hardin calls “consensual constraint” involving mutual constraint regarding the use of a particular resource in order to prevent it from being overtaxed and thus unusable in the future. Has this particular action been followed at present, no it hasn’t.
Due to the competitive nature of corporations, consensual constraint is rarely applied, as seen in the case of resource extractions (i.e., oil and mineral extraction) or overharvesting (i.e., deforestation and overfishing).
What must be understood is that while Carroll shows that corporations have a moral obligation to society due to corporate citizenship, the fact remains that when given a choice between following proper CSR or the company failing and going bankrupt as a result most corporations choose to pursue actions of moral or ethical ambiguity.
It isn’t that corporations aren’t aware of their obligation towards society, but rather what must be understood is that corporations will often pursue a strategy for survival first then the application of ethical practices later.
Interpreting the Social Contract
From the standpoint of Hardin, corporations have a collective responsibility regarding their limitation of resource usage in order to conform to the moral obligations of the social contract (Brzozowski, 2003: 161).
The application of the social contract between corporations and society from this perspective is thus one of preservation wherein corporations agree to limit their actions in order to ensure that resources will still be around for future generations. This is only possible through collective action and agreement since if it were based on individual reciprocity it is doubtful that individual corporations would chose to follow this.
What must be understood is that from perspective of Carroll corporations actually do want to apply proper CSR in their actions since this creates better public relations for the company.
The inherent problem with this is the fact that due to the competitive nature of companies as seen from the perspective of Hardin it becomes harder to implement CSR as corporations struggle to make profits in an economy where morally ambiguous corporate actions result in differing price ratios which aren’t in favor of a company that isn’t willing to pursue alternative actions of possible moral ambiguity.
From the perspective of Carroll corporations have a certain “obligation” towards society in the form of corporate citizenship. This is the application of the social contract through an adherence towards moral and ethical behavior that benefits society since this in turn would cause better business practices to flourish.
On the other hand, as it can be seen in the case of Hardin, it is often doubtful whether individual corporations are capable of applying corporate citizenship into their business models. It can be seen in the case examples within this paper that there have already been numerous moral and ethical violations committed by corporations.
From a certain perspective, it can be seen that for Hardin, individual action leads to the development of individual interests, which results in difficulties in applying proper ethical practices.
For Carroll it can be seen that individual corporations can be made to follow CSR due to the effects of corporate citizen and the social contract. It is from my point of view that I would agree more with Hardin regarding collective action resulting in positive collaborative behavior rather than leaving it up to individual corporations and their supposed adherence to CSR.
What must be understood is that the social contract can be applied in many ways, one of which is a partial implementation of moral obligation while the company in turn commits other morally ambiguous behaviors (Wagner, Lutz & Weitz, 2009: 77 – 81).
For example, the concept of going green is based off the process of altering approaches towards the consumption and utilization of resources so as to ensure a more environmentally friendly method of using and consuming resources. One company that does this particular practice is GE, which prides itself in adhering to “green practices”.
While this adheres to the principles seen in Carroll’s pyramid regarding legal, ethical and sustainable resource responsibilities what must be understood is that the company is at the same time planning to shift a large percentage of its production facilities to China despite the fact it received large tax cuts from the U.S. government in order to create more jobs.
In effect, what occurs in this particular case is a partial application of CSR with a morally ambiguous action being done by the company at the same time (Wagner, Lutz & Weitz, 2009: 77 – 81). What must be understood is that in the case of corporations it is their need to be profitable, which results in the development of corporate rivalries.
The only way to diffuse this is to implement a way of collective responsibility that corporations would feel towards society. While it may be true that Carroll’s model is an effective guide towards proper corporate conduct, it neglects to take into account aspects related to individual self-interest, which Hardin does take into consideration.
Through the use of Hardin’s theory and Carroll’s pyramid, it can be stated that corporations can only be made to agree to conform to the social contract if collective responsibility is applied so as to remove the competitive nature of corporations that compel them to pursue morally dubious practices in order to stay relevant and profitable.
By doing so a collective response can be created to enable socially responsible actions that promote the wellbeing of society.
Reference List
Blake, N. 2009, ‘The Social Contract’, Magill’S Survey Of World Literature, Revised
Edition, pp. 1-2, Literary Reference Center, EBSCOhost.
Brzozowski, D. 2003, ‘Lifeboat ethics: rescuing the metaphor’, Ethics, Place &
Environment, 6, 2, p. 161, Academic Search Premier, EBSCOhost.
Ramasamy, B., & Yeung, M. n.d., ‘Chinese Consumers’ Perception of Corporate Social
Responsibility (CSR)’, Journal Of Business Ethics, 88, p. 119, Science Reference Center, EBSCOhost.
Stansbury, J. 2009, ‘Reasoned Moral Agreement: Applying Discourse Ethics within Organizations’, Business Ethics Quarterly, 19, 1, pp. 33-56, Business Source Premier, EBSCOhost.
Wagner, T., Lutz, R., & Weitz, B. 2009, ‘Corporate hypocrisy: overcoming the threat of inconsistent corporate social responsibility perceptions’, Journal Of Marketing, 73, 6, pp. 77-91, Business Source Premier, EBSCOhost.
Welker, M., Partridge, D., & Hardin, R. 2011, ‘Corporate lives: new perspectives on the social life of the corporate form’, Current Anthropology, 52, 3, pp. 3-16,